Delhi High Court
Commissioner Of Income Tax vs Infra Soft Technologies Ltd. on 21 October, 2010
Author: A.K.Sikri
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ ITA 708 of 2008
% Decision Delivered On: 21st October, 2010.
COMMISSIONER OF INCOME TAX ..... Appellant
Through: Ms. Prem Lata Bansal, Advocate.
VERSUS
INFRA SOFT TECHNOLOGIES LTD. ..... Respondent
Through: Mr. Ajay Vohra with Ms. Kavita Jha,
Akansha Aggarwal and Mr. Somnath
Shukla, Advocates.
CORAM :-
HON'BLE MR. JUSTICE A.K. SIKRI
HON'BLE MS. JUSTICE SURESH KAIT
1. Whether Reporters of Local newspapers may be allowed
to see the Judgment?
2. To be referred to the Reporter or not?
3. Whether the Judgment should be reported in the Digest?
A.K. SIKRI, J. (ORAL)
1. The assessee herein had taken the benefit of provision of Section
80HHE of the Income Tax Act (hereinafter referred to as „the Act‟)
in the preceding Assessment Years. However, for the Assessment
Year 2001-2002, the assessee claimed benefit under Section 10A
of the Act instead of Section 80HHE of the Act. This was denied to
the assessee on the ground that since the assessee had started
claiming the benefit of Section 80HHE of the Act which was
allowed in the previous years, such a switch over was not
permitted in view of sub Section (5) of Section 80HHE of the Act.
The only course of action, which is permissible for the assessee is
to continue to get the benefit under Section 80HHE of the Act
alone.
2. This stand of the Assessing Officer (AO) was repelled by the CIT
(A) holding that the purpose of Sub Section (5) of Section 80HHE
was to avoid double benefit and that would not mean that if the
assessee for a particular Assessment Year wanted relief only
under Section 10A of the Act that would be denied to the
assessee. The only embargo was not to give relief under both the
provisions.
3. The Department filed appeal thereagainst before the Income Tax
Appellate Tribunal (hereinafter referred to as „the Tribunal),
which had been dismissed by the Tribunal confirming the order of
the CIT(A). In its judgment, the Tribunal has relied upon its earlier
decision in the case of Vs. Legato Systems India (P) Limited
Vs. ITO [93 TTJ 828], wherein the provisions of Section 80HHE
and Section 10A of the Act are elaborately discussed and dealt
with and the aforesaid interpretation is given to sub Section 5 of
Section 80HHE of the Act. The Department had filed appeal
against the judgment of the Tribunal in the case of Legato
Systems India Pvt. Ltd. (supra) (in ITA No. 1400/2005). This
appeal was dismissed in limine by passing the following order on
12.07.2005:
" The Tribunal has recorded a finding of fact that the
respondent assessee was not an old unit already in
existence so as to be disentitled to the benefit of exemption
under S.10A of the IT Act, 1961. It has, on that finding,
remitted the matter back to the AO with the following
directions.
We, therefore, set aside the orders of the authorities
below on this point and restore the matter back to the file
of the AO with a direction to allow exemption under S.10A
in both the years in case of the assessee is found to have
satisfied all other requisites envisaged in the scheme of
S.10A of the Act. In case the exemption under Section 10A
cannot be allowed for the reasons of not satisfying the
requisites, the claim of deduction under Se.80HHE shall be
allowed after providing opportunity to meet the requisite.
The above direction is, in our view, just and proper hence
does not call for any interference especially when the
question (whether the assessee) satisfies the prerequisites
stipulated for the purpose of getting benefit under S.10A is
a matter left to be determined by the AO. So also the
entitlement of the assessee to seek deduction under
S.80HHE having been left to be determined by the AO,
subject to assessee‟s satisfying the pre-requisites
stipulated for the grant of such a benefit under the said
provision. No question of law much less a substantial
question of law arises for our consideration in this appeal to
warrant its admission.
The appeal is accordingly dismissed in limine."
4. It is thus clear that this Court has accepted the interpretation
given by the Tribunal to the aforesaid provisions and held that
the benefit on exemption under Section 10A of the Act would be
admissible to the assessee in that particular year. Of course, at
the same time, the Court made it clear that it would be
permissible for the AO, before granting benefit under Section
10A of the Act, to determine as to whether the assessee is
fulfilling all the eligibilities/conditions prescribed for grant of
benefit under Section 10A of the Act or not.
5. We may note that in the present case, the Income Tax Appellate
Tribunal has observed that the CIT (A) has recorded its findings
holding that the conditions prescribed under Section 10A of the
Act have been duly complied with by the assessee and
therefore, there was no reason for denying the directions given
in the said case. These findings are affirmed by the Tribunal as
well.
6. So far, so good. However, Ms. Prem Lata Bansal, learned
counsel appearing for the appellant/Revenue submits that in the
present case, it was not even permissible for the assessee to
claim the benefit of exemption under Section 10A of the Act.
She states that there is impediment in the way of the assessee
to take benefit of the aforesaid provision, as by sheer lapse of
time it had missed the bus. In this behalf, she points out that
the assessee had filed the original return under Section 139(4)
of the Act, which means that the return was not filed within the
time stipulated, but within the extended time. In this return,
the assessee had claimed the benefit of Section 80HHE of the
Act. It is only thereafter by filing the revised return that the
assessee wanted exemption under Section 10A of the Act in
substitution of claim made under Section 80HHE of the Act.
Such a course of action, according to her, was not permissible in
view of the provision of sub-section (5) of Section 139 of the
Act, as the return filed belatedly and governed by Section
139(4) cannot be revised as stipulated in Section 139(5) of the
Act.
7. The order of the AO reveals that on this ground, the claim of the
assessee was rejected. Notwithstanding, the same AO
proceeded further to decide as to whether the assessee was
entitled to claim the benefit under Section 10A of the Act or not.
He discussed this issue and decided against the assessee
holding that switching over the claim from Section 80HHE to
that of Section 10A of the Act is not permissible having regard
to the provision of sub-section (5) of Section 80HHE of the Act.
8. Taking note of these facts, the Tribunal in its impugned
judgment stated that it would be permissible in law for the
assessee to claim deduction under Section 10A of the Act. It is
the opinion of the Tribunal that even if it was not permissible for
the AO to entertain the claim, the Tribunal in exercise of its
power under Section 254 of the Act can still entertain a point of
law for the first time provided the fact on the basis of which the
issue of law raised is a pure question of law and is based on the
facts already on record. The reasons given by the Tribunal in
support are following:
(a) The AO had entertained the claim under Section 10A
on merits, though it would be a different matter that
according to the AO, it was not permissible for the
assessee to make this claim when in the preceding
Assessment Year claimed under Section 80HHE was
made.
(b) Even if it is presumed that the AO could not consider
the claim raised in the revised return, there is ample
power with the Appellate Tribunal to consider the
claim under Section 254 of the Act. In support of this
proposition, the Tribunal relied upon the Judgment of
the Supreme Court in the case of Goetza (India)
Ltd. Vs. Commissioner of Income Tax [284 ITR
323 (SC)] holding as under:
"4. The decision in question is that the power of
the Tribunal under Section 254 of the Income
Tax Act, 1961, is to entertain for the first time a
point of law provided the fact on the basis of
which the issue of law can be raised before the
Tribunal. The decision does not in any way
relate to the power of the A.O. to entertain a
claim for deduction otherwise than by filing a
revised return. In the circumstances of the
case, we dismiss the civil appeal. However, we
make it clear that the issue in the case is limited
to the power of the assessing authority and
does not impinge on the power of the Tribunal
under Section 254 of the IT Act, 1961. There
shall be not order as to costs."
(c) The Tribunal also, it its aforesaid approach drew
sustenance of Circular NO.14(IX-35) of 1955 dated
11th April, 1955, which reads as under:
"Officers of the department must not take
advantage of ignorance of an assessee as to his
rights. It is one of their duties to assist tax payer
in every reasonable way particularly in the
matter of claiming and securing reliefs and in
this regard the officers should take in the
initiative in guiding a taxpayer where
proceedings or other particulars before them
indicate that some refund or relief is due to him.
This attitude would, in the long run, benefit the
department; for it would inspire confidence in
him that he may be sure of getting a square
deal from the department. Although, therefore,
the responsibility for claiming refunds and
reliefs rests with the assessee on whom it is
imposed by the law, officers should:
(a) draw their attention to any refunds or
reliefs to which they appear to be clearly
entitled, but which they have omitted to
claim for some reason or other;
(b) freely advise them when approached by
them as to their rights and liabilities and as
to the procedure to be adopted for claiming
refunds and reliefs."
9. Challenging the aforesaid approach of the Tribunal, submission
of Ms. Bansal is that the issue raised was not pure question of
law inasmuch as necessary facts to establish that the conditions
contained in Section 10A of the Act are fulfilled were not before
the AO or the Tribunal. She submits that it is because of this
reason that the Tribunal could not decide the issue of
admissibility of claim under Section 10A of the Act itself and
matter was restored to the AO for decision on this issue. She
further submits that in view of sub-section (8) of Section 10A of
the Act, the assessee was precluded from shifting the claim from
Section 80HHE to that of Section 10A of the Act in the facts of
this case. She has also challenged the approach of the Tribunal
in entertaining the claim that the original return was filed under
Section 139(4) of the Act and on that basis submitted that the
revised return was invalid in law and could not be taken into
consideration. For this purpose, she has placed strong reliance
on the observations from the judgment of the Supreme Court in
case of Kumar Jagdish Chandra Sinha Vs. Commissioner of
Income Tax [220 ITR 67] in which the Court held that no
revised return can be filed under sub-section (5) of Section 139
in a case where the return is filed under Section 139(4) of the
Act. Once this is so, the revised returns filed by the assessee for
both the said assessment years were invalid in law and could not
have been treated and acted upon as revised returns
contemplated by sub-section (5) of section 139 of the Act.
Consequently, Section 153 (1) (c) was not attracted.
10. We would consider the last submission made by Ms. Bansal. In
Kumar Jagdish Chandra Sinha (supra), the assessee had
filed return for two assessment years under Section 139(4) of the
Act. Thereafter, he filed revised return in respect of these
assessment years on two different dates declaring the total
figure lower than the declared in the original return. The Income
Tax Officers completed the assessments of the two assessment
years on the basis of revised return and also initiated penalty
proceedings under Section 271(1)(c) of the Act. The question of
limitation arose for completion of assessment in terms of Section
153 of the Act. From the date of filing the original return, the
assessment proceedings were completed beyond the period
prescribed under Section 153 of the Act. However, from the date
of filing of the revised return, the assessment was within time. It
is in this context that the question arose as to whether filing of
revised return was permissible under the law. The Supreme
Court decided the issue in negative holding that once the return
is filed under sub-section (4) of Section 139 of the Act, then no
revised return under sub-section (5) of Section 139 is to be filed.
Therefore, there is no quarrel about the proposition that when a
return is filed under Section 139 (4), revised return under Section
139(5) is not permissible under the Act. The Tribunal was
conscious of this fact. It is for this reason the Tribunal treated it
differently altogether. The line of action, which is taken by the
Tribunal was that even if such a claim was not made in the
revised return, but when pressed by the assessee during the
assessment proceedings, the same could be considered by the
AO. For this, the Tribunal referred to the aforesaid Circular dated
11.04.1955, which states that if tax payer is entitled to any claim
or relief under the law, it should not be denied to him only
because he was ignorant about the same. No doubt, in the
original return filed by the assessee under Section 139(4) of the
Act, the assessee had claimed the benefit of deduction under
Section 80HHE. However, if the assessee realized during the
assessment proceedings that he could get better relief to which
he was entitled under Section 10A of the Act and wanted to
substitute the same, it was entertainable. Knowing the limitation
of the AO in this behalf, the Tribunal further observed that at
least the Tribunal was not restricted by those shackles or
limitation about its power inasmuch as the Tribunal was clothed
with sufficient jurisdiction to entertain such a claim under Section
254 of the Act having regard to the pronouncement of law by the
Supreme Court in Goetza (India) Ltd. (supra). It is in this
perspective that the entire matter is to be seen n its entirety.
11. The reason because of which, the Tribunal has remanded the
case back to the AO to decide admissibility of claim under
Section 10A of the Act is not far to see. It is not that the material
was not before the AO. In fact, the assessee had specifically
made claim for exemption under Section 10A of the Act. The AO
did not go into the issue as to whether the assessee was fulfilling
the condition laid down under the said provision because of the
reason that the AO held that it was not permissible for the
assessee to make claim for exemption under Section 10A of the
Act, as in the preceding years, the assessee had claimed the
benefit under Section 80HHE of the Act and sub-section (5)
thereof precluded the assessee from switching over to Section
10A of the Act. Therefore, as far as the Tribunal is concerned,
there was a pure question of law about the interpretation before
it. No doubt, after deciding the issue in favour of the assessee
and holding that such a switch over between Section 10A and
Section 80HHE of the Act was permissible, the Tribunal could
have itself decided whether the conditions laid down in Section
10A of the Act are fulfilled or not. However, having regard to the
fact that the AO has not bestowed any consideration to this
aspect, it was but natural on the part of the Tribunal to remit the
case back to the AO for this purpose. From this, one cannot
jump to the conclusion that the necessary facts for claiming the
benefit under Section 10A of the Act were not before the
Tribunal. In the case of National Thermal Power Co. Ltd. Vs.
Commissioner of Income Tax [229 ITR 383], the Supreme
Court has categorically held that such a question can be raised
before the Tribunal even for the first time, which is in the
following words:
"5. Under Section 254 of the Income-tax Act, the
Appellate Tribunal may, after giving both the parties
to the appeal an opportunity of being heard, pass
such orders thereon as it thinks fit. The power of the
Tribunal in dealing with appeals is thus expressed in
the widest possible terms. The purpose of the
assessment proceedings before the taxing
authorities is to assess correctly the tax liability of an
assessee in accordance with law. If, for example, as a
result of a judicial decision given while the appeal is
pending before the Tribunal, it is found that a non-
taxable item is taxed or a permissible deduction is
denied, we do not see any reason why the assessee
should be prevented from raising that question
before the tribunal for the first time, so long as the
relevant facts are on record in respect of that item.
We do not see any reason to restrict the power of the
Tribunal under Section 254 only to decide the
grounds which arise from the order of the
Commissioner of Income-tax (Appeals). Both the
assessee as well as the Department have a right to
file an appeal/cross-objections before the Tribunal.
We fail to see why the Tribunal should be prevented
from considering questions of law arising in
assessment proceedings although not raised earlier."
12. We, therefore, do not find any merit in this appeal and dismiss
the same.
(A.K. SIKRI)
JUDGE
(SURESH KAIT)
JUDGE
OCTOBER 21, 2010/pmc
